Like the leaves turning colour and blossoming trees, the season of the
RRSP is entering into the seventh-inning stretch. This time of year is
usually witness to a barrage of fund company marketing campaigns,
investment seminars, and the mad rush to make that last minute RRSP
contribution. Before the eleventh hour is upon us, it might be wise
to do a bit of homework before plunking down this year's annual
contribution. Hence, this week is the first of a two-part series
providing some food for thought as we head into the last couple of
weeks of this season.

Get back to basics

I've written this so many times in this space, you're probably tired
of hearing it, but it is the most important lesson an investor can
learn. When making investment decisions, your reference point should
always be back to the basics - your objectives and constraints.

I'm talking about developing a strategy, first and foremost, before
even thinking about specific investments. A previous article expands on the
finer details to ponder in developing your strategy.

Having a strategy based on well thought out goals and expectations are
key to avoiding the classic mistakes that investors have repeated over
and over through time. How do you know if you've broken the cycle or
not? Are you just now jumping into precious metals funds and bond
funds after a year of socking piles of dough away in money market
funds? If so, you may still be running in circles. If not, let's talk
investment options.

Canadian stock funds

This category refers to funds emphasizing the shares of both larger
(large cap) and smaller (small cap) Canadian companies.

I think small caps remain more attractive at this time and probably
deserve a weighting in most portfolios that is slightly higher than
normal. However, be sure to pair your funds up properly. In other
words, if you like Trimark Canadian for large caps, a good fit for
small caps might be Standard Life Growth Equity. If you have a
self-directed RRSP - where you can combine the funds of many firms in
one plan - you'll have the kind of flexibility you need to mix and
match complimentary management teams.

Canadian balanced funds

I'm generally not a fan of balanced funds, but I realize they provide
some benefits to investors - namely the convenience of a "one
decision" investment and the built-in stability of having stocks and
bonds in one package. For more knowledgeable investors and for people
who want more control over their mix of stocks, bonds, and cash, I
usually refrain from recommending balanced funds. However, for those
who can't be bothered there are a few that are worth investigating.

Picking bonds funds is much easier, I think, that most other
funds. With stock funds there are things like foreign content
policies, management style, types of stocks emphasized, etc. The
selection process becomes so much easier as you get into more and more
conservative fund categories. Put another way, the more conservative
the fund type, the more important fees are in the selection process.
Perigee
Active Bond,
Beutel
Goodman Income and
McLean
Budden Fixed Income are three of my favourites for broad based
bond exposure at reasonable fees. All have management expense ratios
(MERs) well under 1 per cent. For bond funds emphasizing the higher
yielding (but higher risk) corporate bonds,
TD
Canadian Bond and
Trimark
Advantage Bondare two fine choices.

While my suggestions are no substitute for personalize, professional
advice, they should provide you with some direction as you run through
the maze of RRSP investment options over the next couple of
weeks. This week's article covers only funds for the Canadian portion
of RRSPs.

Next week, we'll take a look at some top choices for foreign and
specialty funds.

Dan Hallett, CFA, CFP is the President of Dan Hallett & Associates Inc. in
Windsor Ontario. DH&A is registered as Investment Counsel in Ontario and
provides independent investment research to financial advisors. He can be
reached at dha@danhallett.com

Disclaimers: Consult with a
qualified investment adviser before trading. Past performance is a
poor indicator of future performance. The information on this site,
and in its related newsletters, is not intended to be, nor does it
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